Portugal's Constitutional Court has rejected further government’s proposal to increase the tax rate for better-off pensioners.
The judges also have kicked out the plan to increase pay cuts for public sector workers on a salary of €1,500 a month or more.
The two decisions are a further blow to the Passos Coelho government’s plans to reduce public spending and leaves it with an €860 million hole in the national accounts.
The judges did allow cuts in public workers’ salaries for this year and for 2015 but said that was enough, no further cuts were allowable as they were unconstitutional.
The court's decision is a relief to pensioners who from next year will get their full pensions at a cost to the embattled exchequer of €370 million which will have to be found from other sources.
This year’s pay cuts will restart next month but can only continue until the end of 2015.
These proposals were replacements for other initiatives rejected by the Court of Auditors earlier in 2014 and leaves the governemnt's financial planning in disarray, not for the first time.
